Saturday, January 10, 2009

Tesco's Fresh & Easy Neighborhood Market has decided it needs to better communicate its brand, along with its small-format, combination grocery and fresh foods stores in general, to Hispanic consumers in Southern California, southern Nevada and the Metropolitan Phoenix, Arizona region -- which are three of the regions with the highest percentage of Hispanic consumers in the U.S. -- where its 100-plus stores are located.

To this end, Fresh & Easy has retained the Los Angeles-based public relations firm RLPR + Marketing, which specializes in the Hispanic or Latino market, to handle marketing related and other forms of communications and publicity outreach to Latino consumers via the Hispanic media in these three Western U.S. markets, Fresh & Easy Buzz has learned.

The Los Angeles-based Latino market-focused public relations firm was retained by Fresh & Easy in late 2008. The firm's major focus for Fresh & Easy begins this month though.

Rather, RLPR's mission for Tesco is to better position and communicate the Fresh & Easy grocery and fresh foods chain among Hispanic consumers through media relations efforts targeting the Hispanic media, as well as through special events and others forms of marketing communications.

PLPR, which also has an office in New York, bills itself as an 100% Hispanic and woman-owned firm.

The firm's focus is on the fast-growing Latino consumer market. It was started in 1996 by then 25-year old Roxana Lissa, who began with one employee, herself, and an office in her Southern California home. Since then, RLPR has grown to become one of the largest independent Hispanic PR firms in the U.S.

Among the clients RLPR currently does work for include consumer package goods company General Mills, Dutch beer giant Heineken, the national honey board, and others.

Fresh & Easy Buzz is aware of the work of RLPR. In terms of choosing a PR firm focused on the Latino market, it's a good choice for Fresh & Easy, or for any other company for that matter. The firm is creative and has a strong track record.

Merchandising-Operations: 'Si, se puede! for Fresh & Easy doubtful

The problem with Tesco's Fresh & Easy vis-a-vis the Hispanic consumer base, which comprises about 30-40% of the total population in Southern California and Arizona, isn't a PR or marketing issue. Instead it's a merchandising issue.

The Fresh & Easy grocery and fresh foods markets just aren't very Latino-consumer friendly. And in Southern California and Arizona in particular, there are numerous grocery retailers that specialize in Hispanic consumers specifically. And even chains such as Safeway and Ralph's have neighborhood marketing programs in which they focus stores in neighborhoods with high Latino populations on the Hispanic consumer.

Fresh & Easy has miles to go before it can compete with these retailers for the Hispanic food and grocery dollar. It's all about merchandising and very little about marketing or PR.

For example, nearly 100% of the fresh produce in Tesco's Fresh & Easy stores is pre-packaged. Study-after-study conducted in the Western U.S. market over the last 15 years has shown that Hispanic consumers prefer bulk produce far and away over pre-packaged. Can you recall the last Hispanic-focused supermarket you've been in that had even 25% of its fresh produce pre-packaged in bags and plastic tubs like Fresh & Easy stores do, for example?

In surveys Latino shoppers site and abundance of fresh, bulk produce and an extensive selection of fresh meats and fresh fish as the two most important categories they consider when choosing a supermarket. Tesco's Fresh & Easy has neither.

Additionally, Fresh & Easy stores don't cash payroll checks. A significant number of Hispanic consumers in California, Nevada and Arizona essentially use supermarkets, such as Safeway, Ralphs, Frys and Bashas in Southern California and Arizona, or mass merchandisers like Wal-Mart, as their retail banks. They cash their weekly or bi-weekly payroll checks at the store (or in the case of those on government assistance, their government checks), then do their grocery shopping at that store. Another strike against Fresh & Easy vis-vis the Latino consumer.

Studies demonstrate Latino consumers are far more brand and store-loyal than other ethnic groups in the U.S. are Therefore, Hispanic shoppers will stick with a supermarket that cashes their payroll checks, spending nearly 100% of their food and grocery dollars with that retailer. Since Fresh & Easy stores don't cash payroll checks, they aren't even in the ballgame for this significant segment of Latino consumers.

Further, Fresh & Easy stores do not accept WIC (Woman's, Infants and Children's Program) Vouchers, which are given to poor mothers by the U.S. government so they can purchase specific, nutritious items such as infant formula, low-fat whole milk, fruit juice, whole grain cereals and fresh produce for their babies and toddlers. Many poor Hispanic mothers receive these vouchers from the U.S. government. These mothers do the primary grocery shopping for their families. Since Fresh & Easy doesn't accept the WIC Vouchers, they are automatically excluding these poor Latino mothers (and poor mothers from all ethnic backgrounds) from using them (and therefore from shopping in) the grocer's stores.

Back to merchandising: Hispanic consumers cook at home far more than Anglo consumers do. Therefore, they are ingredient food and grocery buyers primarily rather than fresh, prepared(ready-to-heat and ready-to-eat) foods shoppers. Since a significant percentage of the products in Fresh & Easy stores are prepared foods, this aspect (and thus potential for sales) of the chain's merchandising is mainly lost among Hispanic consumers, who of course buy some prepared foods, but do so overall in far lower numbers than Anglo consumers do.

When it comes to fresh meat, which along with fresh produce Latino (and Asian) consumers purchase in far higher numbers than Anglo shoppers do, Fresh & Easy stores have few of the types of cuts of beef, for example, that Hispanic consumers generally purchase. These include thin cuts of round and flank steak and the like. The same is true regarding types of pork roasts and cuts. The case is the same when it comes to the stores' fresh fish and seafood selections.

Moving to the core of the store, to the dry grocery category, Hispanic consumers tend to be much more brand loyal than Anglo consumers are, particularly when it comes to first generation immigrants from Mexico and Central America. The 15 years of research on Hispanic consumers in the Western U.S. mentioned earlier bears this out.

However, since about 65% of the grocery category items in Fresh & Easy stores are under the retailer's fresh & easy store brand, there just isn't enough room to carry the numerous Hispanic brand products most Latino consumers require a supermarket carry in order for it to be their primary food shopping venue. And, Fresh & Easy stores don't currently carry anywhere near the number, or proper variety, of such skus to make them very attractive to most Hispanic consumers.

We have no doubt a creative PR firm such as RLPR will be able to raise Fresh & Easy's profile among Hispanic consumers in Southern California, Nevada and Arizona. That's what they do -- and they do it well overall.

But no marketing communications campaign can take a current format, Tesco's Fresh & Easy, that's not particularly appealing to Latino shoppers, and make it so. Doing that is a merchandising-operations issue.

You can put organic arugula and purple heirloom tomatoes in a burrito after all -- but it's still a burrito. In a similar vein, you can drive Latino consumers into a grocery store with a marketing communications campaign but if that store doesn't suit their shopping needs they aren't likely to return, especially with all the alternatives that do fit their shopping needs in the respective market regions.

As the Fresh & Easy format is today -- majority pre-packaged produce rather than majority bulk, lack of abundance, meager fresh meats that appeal to Latino's, a dearth of key authentic Hispanic brands and skus, policy of not cashing payroll checks, and other aspects we haven't mentioned -- Tesco's Fresh & Easy Neighborhood Market isn't a format that in our analysis offers much appeal to Hispanic consumers as either their primary or even secondary shopping venue for food and groceries.

If Tesco wants to gain a greater share of the Latino consumer dollar -- which with an about 30-40% population percentage range in Southern California, Nevada and Arizona (and much higher in parts of Southern California and Arizona), isn't a bad idea -- it needs to focus first on merchandising, on creating an attractive format for Hispanic shoppers, then communicate that reality to them. As it is now, the grocery chain's Latino marketing program will be all sizzle (marketing) and very little steak (Hispanic consumer merchandising).

But this has been the norm for Tesco's Fresh & Easy since before the first stores even opened in the fall of 2007 -- putting PR over merchandising; the sizzle over the steak. This has surprised us since we know Tesco corporately to generally put merchandising (being a merchant) over being a promoter.

Thus far though that isn't the case with Fresh & Easy Neighborhood Market USA -- which is why in our analysis the business is struggling. Success in food and grocery retailing always puts merchandising, operations and execution over marketing and PR.

In the case of Fresh & Easy's Latino consumer outreach program, we suggest the retailer needs to look at its policies and merchandising, and if it wants to attract more Hispanic shoppers focus on those keys aspects much more seriously before expecting a marketing campaign will win it very many Latino customers.

[For some of the best and most comprehensive research conducted on Hispanic or Latino consumers we suggest the work of Dr. David Hayes-Bautista, who is currently the director of The Center For The Study of Latino Health and Culture at the University of California (UCLA) Medical School in Los Angeles, California. Much of the research we site in our piece comes from Dr. Hayes-Baustista and his staff's work over the years. Another good source of research information on Latino consumers, particularly with a focus on the Western USA, is the Southern California-based Mexican American Grocers Association (MAGA). You can view the trade group's Web site here. MAGA holds a conference and convention each year, focusing on the Hispanic consumer. This year's conference is March 10-12 in Palm Springs, California.]

9 comments:

I can see how the hispanic/latino consumer may not warm up to the pre-packaged and/or pre-constructed meals that are in the store. I'm sure the PR group hired is a way for Tesco to not ignore that consumer and to totally ignore the purchasing power would be taking the proverbial bullet. I don't get to watch many Spanish language channels, but when channel surfing, the national brands that advertise on Univision or Telemundo are just as savvy and professionally done as on regular network TV. Yes, it is disconcerting to find your produce pre-packed and not being able to select from an abundant display (as a Filipino who shops local Asian markets, Fresh & Easy as well as Trader Joe's packaging took a lot to get used to) but once the consumer is taught that there are benefits on how and why F&E does it this way, it can be educational and beneficial.

Though well researched and I'm sure well intentioned, there's a sort of soft discrimination in this kind of research that makes me cringe in that they basically connect Hispanic origin with low income levels. Poor people come in all colours.

I think what is most important to Fresh & Easy is that all their product, regardless of latino preferences, has completely disregarded bilingual packaging. The short and usually minimized name and summary of products are only in English, and while I suspect there's more latinos with strong English skills than we might think, that isn't the case for everyone in their family. The family would probably prefer to buy groceries that doesn't have Grandma unsure of what anything is.

And yes, the Las Vegas metro has Marianna's and other supermarkets targeting this demographic as well.

Tesco sees what's clearly a large minority population that isn't going to be stopping anytime soon and is heavily concentrated in their present regions. However, there's very fundamental issues when you're going after a population that may not be able to read anything in the store. They would be better off playing the demographics game in a different way.

Certainly no "soft discrimination" intended in terms of discusing income aspects of Hispanic consumers. Since the piece is about Latino consumers, it's impossible not to discuss those that are of a low-income nature. But can understand your comment as when generalizing, which one has to do at times in a piece, that impression can be perceived by a reader I suppose.

In terms of income levels by ethnic self-identification, Hispanics do have the second-lowest income levels after African Americans in the U.S.

But also notice we talk about paychecks, reflecting the fact that Latino consumers also have high employment levels rather than being on government assistance. Low income does not mean one doesn't work.

You sort of do the same thing in your comment about English language speaking and Hispanics regarding bilingual packaging. A bit of "soft discrimintaion?" We don't think that's what you meant though.

Regarding multilingual labels, few products, even many geared to Latino's, have it. I happen to think it is a big plus to do so however -- particualrly when targeting first generation Hispanics in states like California and Arizona where there is lots of immigration.

As ever a very interesting analysis from Fresh and Easy buzz. Just to show that this sometimes rather negative analysis on Fresh and Easy is matched by the failure of Whole Foods to make a profit in UK in the face of some fierce opposition from Tesco and Waitrose. However, ASDA (Wall-Mart) continues to do well. Perhaps Tesco could have bought a sizeable US food chain and fine tuned it. Today's Tesco global results are good and shares have gone up plus some analysts are saying their shares are a 'buy' because of their relative success in the face of recession. Your call Buzz.

You are on point about the payroll check cashing. I'm with a Southern California brokerage firm heavy in the Hispanic category. I also worked for Safeway and another chain for 15 years. The supermarkets here, particularly those in heavy Hispanic demographic neighborhoods, cash tens of thousands of dollars worth of payroll checks weekly. When I was in retail I can tell you that particularly Hispanic consumers are very loyal and that they spent on average 20-30 percent of the amount of the payroll check we cashed for them right after. Like clockwork we had regulars who every pay period cashed their checks at the store. It hasn't changed in the two years since I left retail.

Interesting. Fresh & Easy Buzz is the only publication I've seen report on this so far. I agree the Fresh & Easy stores aren't particularly Hispanic-friendly in terms of product selection. But do think any outreach to such an important consumer base is a good idea. But you're right in terms of the probability it won't generate much business for Tesco. Keep up the original reporting.

I'm both a Latino consumer and I work in sales in the food industry in Southern Cal. One thing fresh & easy needs to do if it wants to draw Hispanics is to improve the quality of the tortillas is carrys. Also, the store near me has zero Hispanic pastries. Fresh-made tortillas and specialty pastries are key for any retailer trying to lure Latinos.

The Hispanic customer like any other customer is looking for familar food items that can also be tradional items to feed their family. Shopping at the grocery store that meets there needs does not mean that the sore have a Hispanic name, but it helps. There are key items that will bring Hispanic customers to you store if such items are featured at the right price, season and tie into traditional meals that they will make. A High percieved value of these key items will bring into your store were they can shop the rest of the store to complete their shopping list. It does help if the store clerks speak spanish and are allowed to do so to assist the comsumer to the proper location of their desired products. With a little help they will come to recognize that your store has the products that they are looking for and is there for them. try celebrating more than just Cinco de Mayo, promote during Lent, Mother's Day May 10th, Septemerber 16th, Las Posadas with plenty of tie-ins to make those days special. Yes, you can, but are you ready to go the distance.This can done without putting off other nationalities, everybody has there day, Promote. Show them You Can.

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